Q2 GDP growth of 5.3% below expectations: Finance Ministry.

India’s gross domestic product (GDP) growth in the second quarter of this fiscal year fell short of expectations, the Finance Ministry said on Friday.

The economy grew by 5.3 per cent in the July-September quarter, the lowest in three years, compared to 5.5 per cent in the previous quarter, underscoring the urgency of implementing politically difficult reforms to spur a revival in Asia's third-largest economy.

“The growth rate for the first half of the current financial year works out to 5.4 per cent as against 7.3 percent in the first half of 2011-12.  Overall, the growth rate is below our expectations,” the Finance Ministry said in a statement.

The weakness in the manufacturing sector continued in the second quarter, with the sector growing 0.8 per cent as against 2.9 per cent in the year-ago period.

The agriculture sector grew 1.2 per cent, hit by a lower-than-normal rainfall in July and July. “The impact on the khariff crop has pulled down the growth rate,” the statement added. A weak manufacturing output pulled down industry growth from 2.9 per cent in the second quarter  of 2011-12 to 0.8 per cent in the second quarter of the current year.

Although services showed some improvement, it still remains below the trend level. The sector grew 7.2 per cent in the second quarter this year, down from 8.8 per cent in the year-ago period.

India's economy is battling weak consumer demand in overseas and domestic markets. The trade deficit is the widest ever after exports fell for six straight months. Industrial output has contracted in four out of the last six months.

Worryingly for hopes of a quick rebound, capital goods production—a gauge for investment in the economy—has expanded just once in the last 13 months.

The government now aims to achieve 5.8 per cent growth for the full year. The Reserve Bank of India (RBI) too sharply lowered this fiscal's economic growth projection to 5.8 per cent, from 6.5 per cent earlier.

“I still believe the overall growth rate for the year is between 5.8 per cent and 6 per cent,” Dr C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, told NDTV after the data was released.

However, markets and analysts widely expected the economy to grow at a slower pace under pressure from slowing exports, persistent inflation and lower investments. In a recent report, the International Monetary Fund (IMF) has projected India's economic growth at 4.9 per cent in 2012.

Source : profit.ndtv.com